Bills Digest No. 60 2002-03

WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.

To amend the Trade Practices Act (TPA) to permit
the Australian Competition and Consumer Commission (ACCC) to bring
representative actions on behalf of people damaged by conduct in
breach of the secondary boycott provisions (section 45D and section
45E) of the Act.

Potential Double Dissolution
Trigger

This Bill is identical to legislation introduced
into the House of Representatives on 20 February 2002 and rejected
by the Senate on 19 August 2002.

The Bill has the potential to be a double
dissolution trigger. Pursuant to section 57 of the Australian
Constitution the Prime Minister may advise the Governor-General to
dissolve both Houses of Parliament when the following requirements
are met:

a Bill is passed by the House of Representatives, but the
Senate 'rejects or fails to pass it, or passes it with amendments
to which the House of Representatives will not agree'

a three-month interval elapses from the date of the Senate s
action or inaction, and(1)

the House of Representatives again passes the Bill ('with or
without any amendments which have been made, suggested, or agreed
to by the Senate') and the Senate again 'rejects or fails to pass
it, or passes it with amendments to which the House of
Representatives will not agree'.

In the present case, if the House of
Representatives passes this Bill after its November sittings and
the Senate refuses or fails to pass(2) the Bill or
passes it with amendments unacceptable to the House, the
requirements of the section will have been satisfied.

Once all necessary preconditions have been met,
the Government may advise the Governor-General to dissolve both
Houses immediately or it may delay its request for a simultaneous
dissolution until any date up to 6 months before the House of
Representatives is due to expire.

The present House is due to expire on 11
February 2005, ie 3 years after its first meeting. The next
election for the House of Representatives must be held within 68
days of the expiry of the House, ie by 16 April 2005.

As a double dissolution cannot be granted by the
Governor-General within 6 months before the date of the expiry of
the House of Representatives, the last possible date for granting
of a dissolution under section 57 is Wednesday 11 August 2004. The
subsequent election must be held within 68 days of the date of
dissolution, ie the latest possible polling day for a double
dissolution is Saturday 16 October 2004.(3)

Section 87 of the Trade Practices Act
1974 (TPA) permits the ACCC to bring a representative action
seeking compensation and other remedies on behalf of people who
have suffered, or are likely to suffer loss or damage as a result
of another person s contravention of specified provisions of the
TPA.(4) A person covered by a representative action must
consent to ACCC commencing proceedings.

While the ACCC may bring such actions in
relation to breaches of the whole of Part IVA (unconscionable
conduct), Part IVB (industry codes), Part V and Part VC (consumer
protection), a representative action in relation to Part IV
(restrictive trade practices) may not be commenced if the matter
involves contraventions of the boycott provisions in sections 45D
and 45E of the TPA.

Section 45D prohibits two people from acting in
concert to hinder or prevent a third person from supplying goods or
services to, or acquiring goods or services from, a fourth person
(the target) who is not an employer of the first person or the
second person. To breach the section, the conduct must have been
engaged in for the purpose, and would likely have the effect, of
causing substantial loss or damage to the business of the target.
Section 45E prohibits a person making an agreement with a union for
the purposes of preventing or hindering trade between that person
and a targeted entity.

This Bill is the fifth occasion that the
Government has sought to enable the ACCC to bring representative
actions for contraventions of sections 45D and 45E.

The first attempt was in the Trade Practices
Amendment (Country of Origin Representations) Bill 1998. A schedule
to this Bill sought to empower the ACCC to generally bring
representative actions for breaches of Part IV of the TPA. The Bill
was debated against the backdrop of the waterfront dispute. At the
time the Opposition expressed concern about the ACCC gaining the
ability to conduct (retrospective) secondary boycott actions on
behalf of businesses against trade unions. In the end, the Senate
omitted the representative action provision from the Bill.

During the waterfront dispute, ACCC sought to
overcome its lack of capacity to commence representative actions in
relation to section 45D by seeking findings of fact from the Court.
At the time the ACCC Chairman, Professor Fels, stated that the
intention was to open up the possibility for importers to pursue
the Maritime Union by lowering their evidential
burden.(5)

The Government revived the issue in the Trade
Practices Amendment Bill (No.1) 2000. On this occasion the Senate
rejected the proposal to allow the ACCC to bring representative
actions for all of Part IV and carved out actions in relation to
sections 45D and 45E. The Government reluctantly accepted the
compromise in order to secure the passage of the remainder of the
Bill. As a result of these amendments the ACCC can bring
representative actions in relation to boycott conduct which
substantially lessens competition or affects international
trade(6) but not where the conduct causes substantial
loss or damage to a targeted person.(7)

In August 2001, the Government sought to remove
the remaining limitation through the Workplace Relations and Other
Legislation Amendment (Small Business and Other Measures) Bill
2001. The Bill was not debated before the Parliament was prorogued
for the General Election.

The proposition that the ACCC should have the
capacity to initiate representative actions in relation to breaches
of Part IV has been endorsed by the Australian Law Reform
Commission(8), the House of Representatives Standing
Committee on Industry Science and Technology (the Reid
Committee)(9) and the Joint Select Committee on the
Retailing Sector (the Baird Committee).(10)

The ALRC put the case for representative actions
in the following terms:

Representative actions remove many of the
financial barriers which ordinary people face when seeking to
enforce their legal rights, give the courts a more efficient
process for dealing with cases involving large numbers of people
and help to ensure that laws are enforced more efficiently and more
often.(11)

It is important to note however that none of
these reviews considered the implications of the proposal from an
industrial relations perspective. The Reid and Baird Committees
recommended the measure in the context of debate about improving
small businesses access to a remedy under the misuse of market
power provisions in section 46. Furthermore, at the time the ALRC
made its recommendation, the equivalent of the current section 45D
was located in the Industrial Relations Act 1988. Under
that legislation, enforcement proceedings in relation to the
boycott provisions could not be commenced unless the Australian
Industrial Relations Commission (AIRC) first had the opportunity to
resolve the matter by conciliation.(12)

The question of whether representative actions
should be supported inevitably involves an assessment of the merit
of the sections 45D and 45E. The proposal in this Bill has been
contentious in the past because these sections are arguably the
most politically sensitive provisions in the TPA. The ACCC
initiated proceedings against the MUA during the waterfront dispute
and has expressed support for the measures contained in this Bill.
Nevertheless, it is worth noting that its predecessor, the Trade
Practices Commission, took a different view of the value of the
competition regulator being involved in essentially industrial
disputes. The TPC stated that:

The company damage class of case without
substantial lessening of competition is better left to private
action.

It would seem desirable to avoid, where
competition is not affected, getting involved in an industrial
dispute where the ultimate decision as to the continuing or
settling of cases may need to be taken by companies on commercial
grounds or by the Government on political
grounds.(13)

In April 1976 the Fraser Government established
the Trade Practices Act Review Committee (known as the Swanson
Committee).(14) The Committee s report expressed concern
about the lack of protection for traders against secondary boycotts
and recommended that the law provide an effective avenue of
recourse for affected traders. Secondary boycotts were defined as a
situation where employees of one employer place a boycott on the
dealings of that employer with another person. The Committee did
not express a view on whether this avenue should be provided by the
TPA or industrial legislation.(15)

Responding to the report in 1977, the Government
inserted the original section 45D into the TPA prohibiting boycott
conduct which had the effect or likely effect of causing either:
substantial loss or damage to a targeted person or a substantial
lessening of competition in a market. In introducing the provision,
the then Minister for Business and Consumer Affairs (Mr Howard)
stated that:

boycotts have been used by some trade unions in
this country to dictate the business arrangements of independent
businessmen. In some instances these boycotts have resulted in
higher prices to the consumer. The most common instance of a
secondary boycott occurs where a group of employees collectively
acts for the purpose of interfering with supply of goods and/or
services by their employer to a company. (16)

Subsection 45D(3) provided for a defence if it
could be shown that the dominant purpose of the conduct related to
employment matters. In practice this provision was often
interpreted narrowly and there were very few cases where a union
was able to successfully invoke the defence.(17)

In 1978 subsection 45D(1A) was inserted which
prohibited primary or secondary boycotts which have the purpose or
effect of hindering or preventing interstate or international trade
and commerce.

In 1980, the Fraser Government introduced
section 45E following the Laidely dispute. Leon Laidely Pty Ltd, an
independent haulage contractor, distributed bulk fuel and was
supplied by Amoco. The employees of Amoco driving Amoco delivery
trucks were members of the Transport Workers Union (TWU). The union
argued that Amoco s practice of supplying Laidely denied work to
their members. In February 1980 the TWU placed a black ban on Amoco
supplying petroleum to Laidley. Amoco, in order to keep its depots
open, agreed to TWU demands that Laidley not be supplied.

While Laidley was successful in obtaining an
interlocutory injunction against the TWU under section 45D, the
Fraser Government was of the view that the TPA needed to be
strengthened so that companies did not succumb to union pressure
and therefore inserted section 45E.(18) The section
prohibited collusive agreements between unions and corporations
that hinder the supply or acquisition of goods or services by or
from a third party.

The Labor Party has maintained a long opposition
to sections 45D and 45E. While the ALP has expressed disapproval of
secondary boycotts, it has argued that they are essentially
industrial relations matters that are best resolved through
specialist industrial courts or tribunals rather than through
competition law or by the competition regulator. It has argued that
the focus of regulation should be the resolution of the underlying
dispute and that litigation under the TPA may frustrate this
outcome.

The Hawke Government attempted to repeal
sections 45D and 45E in 1984 however the legislation was defeated
in the Senate. Another attempt was made to amend the operations of
the sections in 1987 but the proposal was abandoned.

Australia ratified ILO Convention No.87 on
Freedom of Association and Protection of the Right to Organise in
1973. During the late 1980s and 1990s the International Labour
Organisation s Committee of Experts on the Application of
Conventions and Recommendations criticised sections 45D and 45E as
prohibiting conduct which should be lawful under the
convention.(19)

In 1993 the Senate Standing Committee on
Employment, Education and Training investigated the operation of
sections 45D and 45E. The Committee divided along party lines. The
ALP/Democrat majority concluded(20), inter
alia:

that the use of sections 45D and 45E, as a response to
industrial action is unduly harsh, and in conflict with Australia's
obligations under ILO conventions on freedom of association

the legitimate rights of business to trade in goods and
services without interference should be properly secured by trade
practices legislation but that sections 45D and 45E, as they then
stood, achieved this result at an unacceptable cost with respect to
the rights of citizens to take legitimate industrial, protest and
other social action; and that, and

a mechanism must be available under industrial relations
legislation to provide for the speedy resolution of industrial
disputes where the primary issue is one of substantial damage to an
enterprise as opposed to substantial lessening of competition in
the market.

Coalition Senators were of the view that:

the provisions are a useful device for preventing and settling
industrial conflict and are predominantly used by employers as a
'last resort'

the provisions do not encourage a disregard for the processes
of arbitration

defences available under subsection 45D(3) of the TPA are
adequate to protect employees rights, and

the high costs that can be imposed on business, even by
relatively short strikes, must be avoided.

Following this report, the Keating Government
inserted a new version of section 45D while section 45E was
repealed.(21) The effect of the amendment to section 45D
was that the prohibition covering secondary boycotts in the TPA was
restricted to boycotts involving a substantial lessening of
competition. Other boycotts were made subject to the Industrial
Relations Act 1988. According to one text writer:

the basic thrust of these changes was to try to
confine the operation of the legislation proscriptions to secondary
boycotts in the strict sense of the term and to try to make access
to relief conditional on first attempting to resolve the matter in
dispute through the Industrial Relations Commission.
(22)

In 1996 the boycott provisions were reinserted
into to the TPA by the Workplace Relations and Other
Legislation Amendment Act 1996. The 1996 amendments did more
than simply reinsert the version of section 45D that applied before
the 1993 amendments. Elements of the former law were broken down
into separate sections. The current provisions are summarised
below.

Section 45D prohibits two people from acting in
concert to hinder or prevent a third person from supplying goods or
services to, or acquiring goods or services from, a fourth person
(the target) who is not an employer of the first person or the
second person. To breach the section, the conduct must have been
engaged in for the purpose, and would likely have the effect, of
causing substantial loss or damage to the business of the
target.(23)

Section 45DA prohibits two persons from acting
in concert to hinder or prevent a third person trading with the
target where the purpose or effect or likely effect is to cause a
substantial lessening of competition in any market where
the target supplies goods or services. As with section 45D, to come
within the prohibition, the target must not be the employer of the
first or second person.(24)

Section 45DB prohibits two persons from acting
in concert to hinder or prevent a third person (who is not their
employer) from engaging in trade or commerce involving the movement
of goods between Australia and places outside
Australia.(25)

As noted above, as a result of the amendments
enacted last year(26), the ACCC can already take
representative actions where there has been a breach of sections
45DA and 45DB. To date, it has not done so.

Section 45DC provides a mechanism for drawing
unions into the scope of section 45D, 45DA and 45DB.

Section 45DD provides that a person will not
contravene 45D if the dominant purpose of the conduct is
substantially related to the terms and conditions of employment in
their workplace. Likewise, if the dominant purpose of the boycott
is substantially related to environmental or consumer protection
and engaging in the conduct is not industrial action, a person will
not be guilty of a contravention.

Section 45E prohibits a person making an
agreement with a union for the purposes of preventing or hindering
trade between that person and another person. In introducing this
provision in 1996 the Government stated that the section was:

directed against a situation where a person
capitulates in order to avoid loss or damage as a result of
threatened industrial action against the target. It complements
sections 45D and 45DA, ensuring that the prohibition on secondary
boycott action is not weakened by collusion between firms and
unions.(27)

Under section 76 of the TPA, only bodies
corporate may be ordered to pay a pecuniary penalty for a breach of
sections 45D, 45DA, 45DB, 45E or 45EA. In the case of section 45DA
the maximum penalty that can be imposed is $10 million. In all
other cases it is $750 000. Injunctions, damages, and other
remedies are available under sections 80, 82 and 87
respectively.

The TPA recognises that the desirability of
resolving the industrial dispute that underlies boycott conduct may
need to be taken into account by the Court. Under section 80AB the
Federal Court has the discretion to stay the operation of an
injunction against boycott conduct where to do so would facilitate
the settlement of a dispute by the AIRC or state industrial
tribunals. More broadly, section 87AA states that in exercising its
enforcement and remedial powers in relation to boycotts, the Court
must take into account action taken or available before the AIRC or
a state tribunal. Particular regard is to be had to conciliation
proceedings.

The Department of Employment, Workplace
Relations and Small Business reports that since the commencement of
the Workplace Relations Act 1996 amendments to the TPA in
1997 there have been 13 applications to the Federal Court under
sections 45D and/or 45DB. Of these cases, 8 have been settled, 2
have been discontinued and 2 dismissed and in one
case(28) a penalty has been imposed. Seven of these
matters were brought by the ACCC.(29)

There appear to have been no proceedings
commenced under section 45E since its re-enactment.

The title of the Bill and the Minister s second
reading speech indicate that the focus of the measure is to protect
small business. During previous debates on proposals to enhance the
ACCC s power to bring representative actions, the Commission has
also committed itself to using such powers to assist the small
business sector.(30)

Nevertheless, the Bill contains no definition of
small business and does not limit the ACCC to a particular class of
business in bringing representative actions. If the Bill is
enacted, the ACCC will be empowered to bring representative actions
on behalf of any person who has suffered loss or damage as a result
of the contravention of sections 45D or 45E.

If the Parliament is concerned that large
businesses could potentially benefit from ACCC representative
actions, it may consider the option of inserting a definition small
business and restricting the capacity of the ACCC to initiating
actions on behalf of large entities. The definition employed by the
Australian Bureau of Statistics may be a useful guide. The ABS
defines small business as one with less than 20 employees in all
industries except manufacturing where they have less than 100
employees, and agriculture where they have an estimated value of
agricultural operations of between $22 500 and
$400 000.(31)

There is a precedent for limiting the operation
of the specified provision of the TPA to small business. The
Trade Practices Amendment (Fair Trading) Act 1998 inserted
section 51AC into the TPA. While that section prohibits
unconscionable conduct in business transactions it does not apply
where the transaction in question involves goods or services worth
less than $3 million or where the aggrieved party is a listed
public company.

It has been established that the ACCC is not
limited to bringing representative actions under section 87 of the
TPA but may also bring proceedings under the Federal Court of
Australia Act 1976 (FCAA).(32) Section 33C of the
FCAA provides that where 7 or more persons have claims
against the same person; and

the claims of all those persons are in respect of, or arise out
of, the same, similar or related circumstances, and

the claims of all those persons give rise to a substantial
common issue of law or fact;

a proceeding may be commenced by one or more of
those persons as representing some or all of them.

In principle, the FCAA could allow the ACCC
bring a representative action in relation to a contravention of
section 45D or 45E of the TPA however to do so the ACCC would need
to establish that it has a claim .

Recent Federal Court cases suggest that the ACCC
s interest in seeking to enforce the TPA does constitute a claim
for the purposes of the FCAA.(33) The Court has held
that the interest of the ACCC does not have to be the same as other
members of the class.

A possible drawback with the FCAA is that the
ACCC can only bring a representative action by leave of the Federal
Court. Under section 33N the Court has the discretion to determine
whether it is appropriate that the claims be pursued by means of a
representative proceeding. On one occasion, the Court has exercised
its discretion and refused to permit the ACCC to bring a
representative action under the FCAA.(34) In contrast,
under section 87 of the TPA, the ACCC s right to proceed has a
statutory basis.

Despite the provisions of the FCAA, supporters
of this Bill may argue that these amendments are necessary to make
it abundantly clear that the ACCC can commence representative
proceedings for a breach of section 45D or 45E and to remove any
remaining technical obstacles.

Existing subsection 87(1A) of the TPA empowers
the Court to make remedial orders, including compensation orders,
for the benefit of people identified in an application made by the
ACCC. Subsection 87(1B) deals with the conditions under which the
ACCC may make an application to the Court under subsection 87(1A).
Currently such applications may not be made on behalf of people who
have suffered, or are likely to suffer, loss or damage by conduct
which breaches sections 45D or 45E.

Item 1 deletes the reference to
sections 45D and 45E in paragraph 87(1A)(b). It would enable the
Court to make orders in relation to an application brought by the
ACCC concerning any conduct in breach of the restrictive trade
practices provisions in Part IV.

Item 2 deletes the reference to
sections 45D and 45E in paragraph 87(1B)(a). It would permit the
ACCC to make an application to the Court for an order on behalf one
or more people damaged by any conduct in breach of Part IV.

These amendments do not have retrospective
effect. The ACCC will only be able to bring a representative action
in relation to conduct in breach of sections 45D and 45E that
occurs after this legislation has received Royal Assent
(item 3).

Supporters of this legislation have championed
this Bill as a measure to improve access to justice for small
business. In his second reading speech, the Minister cited
anecdotal evidence of small firms that have been the victim of
union organised secondary boycotts as examples of situations where
the powers this Bill gives to the ACCC could be usefully
deployed.(35) The Bill improves the formal legal
protection available to businesses that may have been damaged by
boycott conduct but lack the financial resources to initiate
private litigation under the TPA. The ACCC is a well-resourced
agency with an annual budget in excess of $61 million. The
Commission also has a litigation reserve of $11 million which it
plans to build to $20 million over the next few
years.(36) The Government has also expressed the hope
that the capacity of the ACCC to initiate representative action
will be a substantial disincentive to people contemplating conduct
in breach of sections 45D and 45E.(37)

Critics of the legislation may argue however
that the benefits of the change for small business have been
overstated. The ACCC already has mechanisms at its disposal to
assist businesses who suffer loss as a result of conduct in breach
of sections 45D or 45E. As in the waterfront dispute, it may ask
the court to make findings of fact which significantly lower the
financial burden of litigation for business. In addition, the ACCC
may initiate representative proceedings under the Federal Court of
Australia Act. While the technical requirements of the FCAA are
more onerous than section 87B of the TPA, there is no evidence that
this has deterred the ACCC from using the FCAA. As a practical
matter, the ACCC itself has admitted that representative actions
are very resource intensive [and that] consequently, the Commission
s ability to run many such cases each year is severely limited.
(38) This is borne out by the fact that the ACCC has not
brought a representative action in relation to any of the other
provisions of Part IV since it gained the power to do so in July
2001.

The difference of opinion between the Government
and Opposition over the measures contained in this Bill reflects
the fact that the place of sections 45D and 45E in the TPA has been
hotly contested for over twenty years. The dispute between the
major parties is more concerned with this fundamental issue than
the procedural matter of whether the scope of the ACCC s capacity
bring representative actions should be extended.

If the Senate did not reject the Bill outright but declined to
deal with it within the Government's timeframe, such a delay may or
may not amount to a 'failure to pass' within the meaning of section
57 of the Constitution. What amounts to a 'failure to pass' depends
on the particular circumstances. In Victoria v Commonwealth the
Court stated that the Senate must have a proper opportunity to
consider the Bill see Barwick CJ at 134 CLR 121-122.

A more detailed account of possible election dates is given in
'Timetables for the Next Commonwealth Election', Research Note
No.37 2001-2002, prepared by Rob Lundie of the Politics and Public
Administration Group (IRS).

The ACCC may also seek to bring a representative action under
the Federal Court of Australia Act 1976. This is discussed
on page 9 below.

Professor Fels, Transcript of Interview on Business Sunday, 24
May 1998.

House of Representatives Standing Committee on Industry,
Science and technology, Finding a balance: towards fair trading
in Australia, May 1997, p. 133. While endorsing the proposal
to permit representative actions under Part IV of the TPA, the Reid
Committee cautioned that the measure would marginally improve small
business access to justice .

Joint Select Committee on the Retailing sector, Fair Market
or Market Failure? A Review of the Australian Retailing
Sector, August 1999.

Mark Tapley
5 November 2002
Bills Digest Service
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